Lilly to Cut 3500 Jobs, Aims for $500 Million in Savings

The pharma major anticipates an annualized cost savings of roughly $500 million starting in 2018 based on a significant reduction in its global workforce.

Sep 08, 2017

By Pharmaceutical Technology Editors

Eli Lilly and Company announced on Sep. 7, 2017 that it will cut approximately 3500 positions in its global workforce, and aims to achieve approximately $500 million in annualized savings starting in 2018, as part of its efforts to streamline operations. The company intends to more efficiently focus resources on developing new medicines and to improve its cost structure.

Lilly expects the majority of the positions eliminated to come from a US voluntary early retirement program, which is being offered to employees who meet certain criteria. The program, announced to US employees on Sep.7, 2017, will be largely completed by Dec. 31, 2017.

Remaining positions will come from other anticipated workforce reductions, including select site closures. The company will move production from its animal health manufacturing facility in Larchwood, IA, to an existing plant in Fort Dodge, IA, and continue productivity improvement efforts around the world. In addition, the company will close an R&D office in Bridgewater, NJ, and the Lilly China Research and Development Center in Shanghai, China. The company will also further consolidate some work to its existing shared service centers.

In addition to the US voluntary early retirement program, the company will determine where it needs to further reduce costs and improve efficiencies, including an evaluation of necessary adjustments to the workforce and continued investment in new medicines and growth.

Lilly expects to incur approximately $1.2 billion in pre-tax charges, or $0.80 per share after-tax. This includes the estimated participation of the US voluntary early retirement program, global severance, and facility closures. The annualized workforce savings of approximately $500 million will be about equally split to improve the company's cost structure and reinvest in the business, including product launches and clinical development for new indications and line extensions.

"We have an abundance of opportunities—eight medicines launched in the past four years and the potential for two more by the end of next year," said David Ricks, Lilly's chairman and CEO, in a company press release. "To fully realize these opportunities and invest in the next generation of new medicines, we are taking action to streamline our organization and reduce our fixed costs around the world."